Thursday, 5 September 2013

Prince and The (Sheffield) Revolution

The several hundred Blades fans at Scunthorpe for the Johnstone's Paint Trophy tie were still in dreamland. "We're so rich it's unbelievable!"…"Shall we buy a ground for you?" The announcement that morning of the purchase of 50% of the football club by Prince Abdullah bin Mosaad bin Abdulaziz Al Saud had left most fans slightly shell-shocked, as the media bandied around million/billion pound figures of the Prince's net worth. Yet underlying the braggadocio of the chants was an inherent nervousness; a feeling of disbelief, that this cannot really be happening at Bramall Lane.
 
 
 
 
To those surprised by this edginess you only have to look back at a list of United's previous chairmen and some of the potential owners who, thankfully, never got their hands on the club. From the country's biggest white collar fraudster, to an Iraqi businessman later to undergo gender realignment - before a subsequent reversal. From a chairman subject to an international arrest warrant to a fugitive still on the run from Interpol and a London socialite known as "The Count" who had indirect connections to Libyan arms dealers. Then throw in the tempestuous time when Charles Green acted as Mike McDonald's axe-man.
 
During Kevin McCabe's reign as chairman and owner there has been the rebuffed interest of Singaporean businessman Joe Sim, as revealed in a Channel 4 Dispatches investigation, the interest from Malaysian Vinod Sekhar (who survived a bankruptcy claim in his own country) and the recent revelation from Kevin McCabe that he turned down an offer to buy the club from Carson Yeung back in 2007. Who can blame fans for being a little cautious?
 
You only have to look elsewhere to see the case for caution strengthened; Venky's at Blackburn Rovers, Cardiff losing their identity and history, Hull City Tigers, the problems caused by consecutive owners at Portsmouth, both Liverpool and Villa finding that big money US takeovers are no guarantee of success.
 
I think in the case of United the retained interest of the McCabe family, owning the other 50%,  should give us comfort; acting as custodians of the club's past present and future. For the deal that has been done, Kevin McCabe and his family deserve credit. Both he and the Prince have been quick to reassure us that the focus on the club as part of the community and its rich history is, and will continue to be, respected.
 
But despite the seemingly beneficial nature of the deal and an outcome most fans would seem happy with, it doesn't mean to say that we (as fans) didn't have the right to question what had gone before. Many fans (and this blog) have questioned the true motives regarding the transfer of theground and other assets into the Scarborough owned plc. and the losses incurred in acquiring and running overseas clubs in geographies seemingly motivated by real estate opportunities than burgeoning football interest.
 
The separation of stadium/hotel/academy from the football club remains a risk, although there is less talk of an exit plan from the McCabe family which gives some comfort. His stated motives at the time of the asset transfer; of creating an easy investment in a "clean" football club, free of debt and other costs appears to have worked. Whether you see that as clever move that has paid off or someone that has struck lucky is up to you.
 
At the time I struggled to see the desirability of such a deal for an investor and any return for the Prince can only really be realised by two promotions. It may be that he believes this is achievable and for a £1 up front cost that may be a risk worth taking for a man who professes to love football so much. For the McCabe family they retain their sole interest in the fixed assets of the club, a significant amount by which to secure and recover some of the multi- million pound investment over their tenure.
 
Too many times in the past, fans have sat back and accepted that people are acting in the best interests of their club without questioning the true motives. That lack of curiosity, the absence of a questioning approach, the willingness to take everything at face value has left some clubs in dire straits. Yes it was Kevin McCabe's money that was used to plug the holes left by poor decision making; yes he funded the follies and legacies of apparently trusted lieutenants in Terry Robinson and Trevor Birch, but over that time considerable finance was provided by the supporters. There needs to be acknowledgement that fans are stakeholders (both financial and emotional), something that fans' pressure groups are ensuring that clubs recognise, particularly outside the Premier League and at those clubs where the parachute payments have expired and times are leaner.
 
If you doubt this, consider the amount of turnover generated, both directly and indirectly by supporters of Sheffield United. In the financial statements to 30 June 2012 gate receipts accounted for £4.5m of United's turnover of £10.3m. Sponsorship, royalties, merchandise and advertising (much of it funded by fans as well) accounted for a further £3.6m of the £10.3m. The fact this barely covered half the costs is due to decisions made by the owners and board of directors. The club kept a Premier league infrastructure for too long and gambled heavily in the wrong areas. The McCabe family got in too deep and have fought to extricate themselves from it, at great cost.
 
Never underestimate the fans' input into the financial well-being of a football club; whether it has a benefactor or is run as a fans' trust or community club. Football without fans is nothing. Yes McCabe has put in close to £90m during his reign a large proportion of his wealth, but what about the fan that spends upwards of £2,000 a year following his team home and away? That could be up to a quarter of some fans' net annual earnings. A not inconsiderable amount, unconditionally spent and often in blind faith.
 
So how will the injection of Saudi millions affect United going forward? The answer is that it is difficult to predict. Getting out of League 1 this season is far from certain. In David Weir we have a manager trying to impose his ideas on a squad of players that is gradually evolving into his team and he has lost the key player that his pre-season preparation and 4-2-3-1 formation was built around - Kevin McDonald.
 
On his appointment in the summer I stated he would need time and that promotion may have to wait for a season, whilst the squad is over-hauled and he builds a strong team with the work ethic and style he demands. Even with an injection of money I don't see that changing. It still looks like we have square pegs in round holes and although you can see what Weir is trying to achieve, the pretty passing is only getting us so far down the pitch and a lack of goal threat, never mind goals, is a concern.
 
Sadly fans are getting impatient already and defeat at Rotherham on Saturday could leave United in the bottom four. If the fans get twitchy, will the new joint owner exercise restraint? Interestingly, in an interview with Radio Sheffield Kevin McCabe referred to the Saudi money being used on improving the playing side "and better management staff, perhaps".
 
Another factor in limiting the impact of any cash injection is the Financial Fair Play rules. While ever United are in League 1, salaries will be limited to 60% of turnover. This means that any money will be used on transfer fees for players that will still need to fit in with the existing wage structure that will not take the wage bill over the cap.
 
I have seen some Blades criticising the timing of the announcement, just after the transfer window closes, but I suspect with the limitations on wages we were limited in what we could achieve with the cash anyway. It is also worth bearing in mind we have paid fees for Lyle Taylor, Jose Baxter and Florent Cuvelier, which could well be a sign of monies being advanced ahead of the official announcement.   
 
Yes there are ways around the rules, through creative sponsorship and advertising deals, but the need for a financially sustainable club has been emphasised as an objective in the past and certainly appears to be something the Prince is keen on in initial statements. That money is not frittered away without good reason and having a club that balances its books will be important if promotion is achieved. 
 
The differing FFP rules will have a different impact if and when United achieve reach the Championship. From this season clubs must restrict their losses to a maximum of £3m, however if an owner is willing to convert the losses to equity (without funding this via borrowing) the limit increases to £8m; in effect costing the owner up to £5m. The limits reduce year on year and by 2015-16 will be £2m or £5m if the difference is converted to equity.
 
This could be a reason for the lack of funding across the city where Wednesday (reportedly making losses of £5m a year) spent little in the transfer window. At a time when he is actively trying to sell the club, Milan Mandaric would risk increasing his asking price considerably or being required to invest money he may never recover. Let's not forget in the last financial statements United were making a loss of £13m and whilst this year's results are yet to be announced they will do well to have halved that deficit.
 
Concerns have been expressed that the Prince is not as loaded as the inflated figures first reported, personally worth £93m according to Forbes, yet the reality is that it may not need a significant amount of that wealth invested in United over the next couple of years. In an interview, post announcement, Simon McCabe said the expectation and objective was that it would take £20m and three years to get back to the Premier League. My fear is that is asking too much too soon; at the very least a promotion this season, or back to back promotions from League 1 to the Premier League. Oh for the heady, pre-Premier League, days of 1988-1990 when we achieved this under Dave Bassett.
 
Significant overseas money is no guarantee of success or a return to the Premier League; just ask Leicester, Nottingham Forest, Blackburn Rovers, but I guess there is little harm in setting targets and showing some ambition. The club may need to carefully manage expectations though, especially when the initial buzz of the investment has died down.
 
The Prince is reportedly a big fan of Fantasy Football. Most people I know who play Fantasy Football  lose interest part way through a season, when the transfers haven't paid off  and they are too far adrift of the prize money in their local league. Let's hope that he doesn't lose interest if the three year plan is delayed and that he is in this for the longer term as promised. This isn't fantasy football; it is real life, with real people, real employees and real stakeholders.

3 comments:

  1. Great blog. A lot of food for thought there!

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  2. I for one am all for this, the other alternative is the 'carry on as we were route' and that was hardly paying off was it.

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